How to File Self Employment Taxes Step by Step

Learn how to file self-employment taxes step by step. Use our self-employed tax deductions worksheet and fill out a self-employment tax form.

Working for yourself has become more and more common over the years. Many people will even have several jobs, including side gigs, contract work, and freelancing. If you do any kind of work for yourself and earn an income on that work, then you are considered self-employed and may need to file a few extra tax documents this tax season.

File Both Federal and States Taxes at Check City.

Self-Employment Tax Vs Income Tax

What is self-employment and what does it have to do with taxes? As you may already know, there are many different kinds of employment. A traditional kind of employment involves an individual being hired directly under a company or business. Traditional employees then receive a W2 each year to file their income tax. But not everyone is traditionally employed. If you are self-employed, that means you work for yourself. You may work with other contract workers to get a project done, or you might work for clients who hire you for your skills, but your “boss” is technically yourself. 

Being self-employed means that you are not a traditional employee, which means you don’t receive a W2 to file your income taxes for that self-employed work. But if you still receive income for the freelance or contract work you do, then you’ll still be subject to income tax. You will just need a different tax document to file the income tax for your self-employed work. Most likely, if you are self-employed, you’ll need a 1099 tax form for independent contractors or freelancers to file income taxes. Then, you’ll need a 1040 tax form to compile all the information from any 1099 forms you’ve received to report all your earnings for that year. 

1099 Form

Step 1: What Is Self Employed? Make Sure You Qualify

Before you worry about self-employment taxes, make sure you qualify as someone who is self-employed. One simple way to figure out if you are self-employed rather than traditionally employed is if you get a W2 tax form or not. Traditional employees will receive a W2 tax form for the traditional income they received, while self-employed employees will receive a 1099 tax form for the self-employed income they received. Keep in mind that if you work as both a traditional and self-employed worker, then you may receive both types of tax forms. 

You qualify as self-employed if you any of the following apply to you:

  • You are a freelancer
  • You are an independent contractor
  • You practice a trade 
  • You have a side gig 
  • You are in business for yourself  

Another qualifying factor of self-employed income taxes is if you made enough money working for yourself to need to pay income tax. If your earnings for the year are less than $400 then your personal business hasn’t made enough to need to pay income taxes yet. 

Step 2: Make A List Of Self Employment Tax Deductions 

 Once you know you qualify as someone who is self-employed, you can start taking advantage of tax deductions designed for you! Just remember that many of these deductions depend on whether these expenses apply to your self-employed work or not. For example, if you use your car for your work then car expenses can qualify, while if you don’t use your car for work, vehicle expenses won’t qualify. Here are just a few of the tax deductions you could make as a self-employed person: 

  • Vehicle expenses like gas, oil changes, insurance, repairs, etc. 
  • Wages paid to anyone working for you 
  • Advertising expenses for your personal business
  • Office supplies 
  • Rent expenses for storage or office spaces 
  • Banking fees for business accounts 
  • Legal fees 
  • Business expenses like accounting, tax preparers, etc. 

Whether you handle your business finances yourself or hire a bookkeeper or accountant, keep a careful record of all the expenses associated with your business. It can help to create a separate business account at your bank so all of those expenses can remain in one location, separate from your personal expenses. 

Self Employed Tax Deductions Worksheet

A self-employed tax deduction worksheet is a worksheet that helps you itemize all your business expenses. The worksheet will go over every detail of personal business expenses you could have as someone who is self-employed. That way, nothing will be forgotten or left out of your se3lf employed tax deductions. 

Tax worksheet example
Download a Self-Employed Tax Deductions Worksheet.

Step 3: Fill Out Self Employment Tax Forms

Before going into business for yourself, it is a good idea to look into all the financial details like which tax forms you’ll need to use. 

A 1040 Tax Form is the typical income tax form that individuals will use to fill out and report their earnings for the year. You may also need a Schedule C Tax Form (this will report the income and losses of your business) or a Schedule SE Tax Form (this will report your self-employed Social Security and Medicare Taxes). 

You might also receive 1099 Tax Forms from different clients as a freelance worker, outlining how much you were paid by them. These 1099 forms will be used then to fill out your 1040 form, which will be your complete report of all your earnings. 

Deferral of Self-Employment Tax

There are some special instances where deferral of self-employment taxes is possible. One such special circumstance was the Coronavirus Adi, Relief, and Economic Security Act in 2020. This act allowed some citizens to waive or defer certain tax obligations in an effort to help those who were struggling financially during the pandemic. 

However, if you deferred self-employment taxes in 2020, those taxes would still eventually need to be paid. Deferrals are not the same as an exemption. If you deferred self-employment taxes in 2020 then at least half of those taxes would have been due December 31, 2021, while the other half is due December 31, 2022. 

In Conclusion, 

Working for yourself is an adventure that doesn’t have to be stressful. With a little tax preparation help, you can become a pro at everything you need to know to do taxes for your small business.